What is a toggle offset loan?
At Mortgage House, we pride ourselves on having a range of different mortgages to suit the needs of almost everybody. We understand that no two people are the same, and when it comes to their property loan needs, it makes sense that no two people are after exactly the same thing. A toggle offset loan is one of the many examples we have of mortgages that are a little different. A toggle offset loan provides you with the benefits of a variable rate home loan, as well as a fixed rate loan. A variable rate loan means the interest rates can rise and fall over the time of the loan. A fixed rate means you can fix the interest rate for a period of time. It allows you to maximise interest savings through our intelligent toggle offset system, where half your loan is fixed and half is variable. One offset account is linked to the variable, and another to the fixed. You can toggle between the two to make interest savings.
What does offset mean?
An offset account is a normal transaction account that is linked to your mortgage. The balance in that account offsets the principal amount of the loan, which can help reduce the interest payable. For example, if you have a loan of $400,000, and your offset account has $50,000 in it, the interest will be payable on $350,000. So, the overall interest is calculated on the loan amount minus what’s in the offset account. Obviously both can change at any given time, meaning the interest amounts can also change. With toggle offset mortgages, there is an offset account for the variable rate portion of your loan, and a separate offset account for the fixed rate section of your loan. You can toggle between the two based on where you think you can save the most interest. Your repayments will stay the same, but how much of your payments goes towards your principal and how much goes towards interest changes. It can save you thousands of dollars and make a significant impact on how long it takes you to pay off your loan. One option can be to pretend to pay a 30-year loan off as you would pay, say, a 15 or 25 year loan. Instead of making the extra payments, put them into your offset account. This gives you access to the money if you need it for other things, can allow you to pay off your loan faster, or can give you a buffer if interest rates rise.
What are the benefits of toggle offset mortgages?
The first benefit with toggle offset mortgages is that you won’t have to decide between a variable or fixed rate loan. That can be a big relief for some people. Secondly, as we discussed above, one option is to make higher payments into your offset accounts and still have access to that money in case of emergencies or a rise in the variable rate. You can also make additional payments to toggle offset mortgages without attracting penalties or fees, which can happen with some fixed rate loans. Finally, you have access to half a loan that can benefit if variable interest rates drop, and you have the security of a fixed rate if they rise quickly.
How is a split loan different?
A type of loan that is not dissimilar to toggle offset mortgages is a split home loan. Like toggle offset, a split home loan allows you to split your home loan between a fixed rate and a variable rate. Unlike toggle offset mortgages, you can choose the percentage of the loan you want fixed and the percentage you want variable. You can even change that percentage a certain amount of times for free, depending on your circumstances and the rate. However, there may be no direct offset accounts linked to split home loans as they are generally simpler loan structures, which doesn’t allow for toggling. However, speak with us and we can see whether this is available on our loan options.
What types of toggle offset loans are there?
At Mortgage House, we have access to a number of different toggle offset mortgages that can help make your property dreams come true. We have a large range of mortgages with fixed rates, with periods of between one and five years. We also have toggle offset mortgages for investment loans, as well as interest-only mortgages. And, of course you can chose from our popular standard loan options as well. Our award-winning way of doing things means we can be with you every step of the way, from the first day you think about buying a home, to the day of settlement – and beyond. We understand your needs change all the time, and our comprehensive range of mortgages means we can help you achieve your goals, whatever they may be.